Opportunity-zones are designed by the tax cuts and job act to encourage investment into economically distressed and low-income areas through capital gains incentives.
Opportunity Zones allow for real estate investors to defer capital gains tax from any real estate investment if it is reinvested into an opportunity-zone property!
Those capital gains are not taxed until the end of 2026 or when the asset is disposed of (sold)!
If an investor holds onto an opportunity-zone property for 5 years, the taxable gain reduces by 10% and if it is held for 7 years the taxable gain reduces by 15%.
As seen in the video, if you received $50,000 in gains, only $45,000 is taxable if held for 5 years and only $42,500 is taxable if held for 7 years!
Another tax benefit to investing in opportunity zones is the tax deferral on a property’s appreciation.
In the video, we showed an example of an investor who had invested $100,000 into an opportunity zone project and held it a minimum of 10 years and if it eventually sold for $300,000 due to appreciation, that investor would pay zero dollars in taxes on the 200,000 gain!
Opportunity zones can be a great opportunity for investors to receive immense tax advantages while also benefiting the community. Keep in mind that managing properties in lower-income areas may be a challenge for certain property management companies so before investing in lower-income areas make sure you are equipped with the right team to ensure a property’s success.
How to Find Opportunity Zones?
If you are looking to find qualified opportunity zones. Here is a list of some states with the largest amount of designated opportunity zones and low-income tracts.
Opportunity Zones Alabama
Opportunity Zones Arizona
Opportunity Zones California
Opportunity Zones Colorado
Opportunity Zones Florida
Opportunity Zones Michigan
Opportunity Zones New York
Opportunity Zones Texas
Opportunity Zones Georgia
Opportunity Zones Virginia
To research the opportunity zones in additional states, go here.
Make sure to keep in mind that there are certain opportunity zone regulations to follow in order for the project to qualify with the IRS.
Find Opportunity Zone Regulations Here.
As mentioned in the video, be sure to speak to your CPA to help guide you on taking advantage of the tax deferrals opportunity zones have to offer!
Video Transcription
Meet Jeff!
Jeff wants to learn more about investing in opportunity-zones and decides to reach out to his CPA Carly!
Carly explains that opportunity-zones are designed by the tax cuts and job act to encourage investment into economically distressed and low-income areas through capital gains incentives!!
She explains that investors can defer capitalgains tax from any investment if it is reinvested into an opportunity-zone property! Those capital gains are not taxed until the end of 2026 or when the asset is disposed of.
Carly explains that if an investor holds onto an opportunity-zone property for 5 years, the taxable gain reduces by 10%. If it is held for 7 years the taxable gain reduces by 15%. For example if you received $50,000 in gains only $45,000 is taxable if held for 5 years and only $42,500 Is taxable if held for 7 years.
Carly says another tax benefit to opportunities-zones is tax deferral on a properties appreciation.
if an investor invested $100,000 into an opportunity-zone project and held it a minimum of 10yrs and is eventually sold for $300,000 due to appreciation, that investor would pay zero taxes on the 200,000 gain!!
Keep in mind, there are certain rules to follow in order for the project to qualify with the IRS – so be sure to speak to your professional!
Jeff now fully understands opportunity-zones and the great advantages they provide to investors AND lower-income areas!